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A&D leaders are shaping their portfolios of products, services and markets for long-term growth

Shaping portfolios of products, services and markets

To turn their growth expectations into reality, aerospace and defense organizations are taking steps to reshape their portfolios of products, services and markets to pursue future opportunities. Significant change is coming to the A&D sector.

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As aerospace and defense organizations prepare to take advantage of new and emerging growth opportunities, our survey suggests that executives are exploring a wide variety of strategies and options to drive growth. Eighty-seven percent of respondents say they plan to change the range of products they offer over the next 2 years while 91 percent say they plan to change their range of services.

Entering new markets

“While A&D players are keen to improve their product range, the bigger prize lies in creating the right ecosystem of services around those products in order to drive longer-term value for customers and for manufacturers,” notes Tom Mayor, National Service Group Leader, Industrial Manufacturing Strategy, KPMG in the US. “We expect to see services start to make up larger and larger proportions of revenues in this sector over the coming years.”

With economic growth remaining sluggish and defense budgets flat in the mature markets, many A&D organizations are now looking to new foreign markets to drive the next round of growth. In fact, more than nine-in-ten A&D respondents say they plan to expand into new geographic markets over the next 2 years.

Pursuing organic growth

While recent market activity illustrates continued appetite for mergers and acquisitions, our data suggest that today’s A&D sector is highly focused on conducting organic investments to address their growth priorities. Seventy percent of respondents say that organic investment will be their predominant strategy for growth going forward, versus just 33 percent who say their preference would be for inorganic growth through mergers and acquisitions.

Shifting investment from mature to emerging markets

All signs indicate that growth opportunities are shifting from the mature markets to the emerging markets and our survey suggests that many manufacturers are starting to rethink their foreign investment strategy. Indeed, rather than basing their investment decisions purely on cost considerations and budget forecasts, A&D players are increasingly thinking about how they can leverage their capital overseas to help them secure new growth opportunities.

What’s the point?

A&D manufacturers are exploring and exploiting every potential opportunity for growth and reshaping their portfolio of markets to secure growth. Leading A&D manufacturers responding by:

partnering and entering into Joint Ventures with non-traditional suppliers to break into new markets and drive innovation in existing market segments

assessing future growth opportunities and existing capabilities to build market-leading propositions in new sectors and markets

shaping their portfolio of products, markets and partnerships to align to new growth opportunities

shifting towards a demand-driven business model and encouraging the earlier involvement of suppliers and outsourced partners

shifting their supply chain and product assembly east to capitalize on new growth markets and opportunities

evaluating their foreign supply requirements and assessing the quality and capability of new foreign suppliers

tightening the integration of their supply chain and enhancing flexibility and agility through new tools and extended enterprise solutions.